04-21-2010, 11:46 PM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />Dears
Well, I will not comment on whatever is going on in the interviews, yet the question on Deferred Tax does not appeal in the way it has been asked. However, every one carries different perception, understanding and opinion and might that buddy be knowing something out of the box.
An entity has to recognize the deffered tax at every cost (since it is required by an IFRS) if the IFRS's (IAS-12) requirments for recognizing such ASSET and INCOME are technically met. There is nothing like ADVISING aclient for reduction of losses on this issue. If deferred tax asset arises and requirements are met it HAS TO BE recognized. If entity does not recognize it, auditor has to qualify his report; and where it cannot be recognized and the entity recognizes it, again audit report has to be qualified. (Materiality may count in taking decision).
Mind it, deferred tax income is not an operational item and it will never in essence will ensure continuety of generation of income flow from operations by any means. If there are no future expectations as to TAXABLE profits and if the deferred tax asset is technically found to be impaired on the grounds provided by IAS-12, deferred tax asset cannot be recognized or will be sliced down to the acceptable limit.
I may be ignoring something but so far I am wondering what an "ADVICE" has to do with deferred tax issue. You have to follow IFRS and if you are not doing it, auditor has to modify his opinion. Simple. Even if recognition of deferred tax asset will reduce accumulated loss yet it has nothing to do with ADVICE. It looks weird.
This is just like saying that if an entity is earning good profits and wishes to reduce reported profitability you should ADVISE them to charge depreciation. What the hell depreciation has to do with advice?
Anyway there may be a case of misunderstanding the question at all and that buddy might have asked altogether a different thing.
As far as reduction of losses is concerned, there could be 101 advices but before that the due insight of the entity and reason of its losses is inevitable.
Regards,
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Isn't the job of the auditor to make sure that the financial statements are reasonably free from material misstatement whether due to fraud or error?If the business is incurring losses due to some weaknesses in internal control,the auditor points those out routinely in the Letter of Weakness.Why would the auditor advise the business of ways of minimizing general losses in the first place?It's not part of the audit engagement.I am confused.Please clarify.
<br />Dears
Well, I will not comment on whatever is going on in the interviews, yet the question on Deferred Tax does not appeal in the way it has been asked. However, every one carries different perception, understanding and opinion and might that buddy be knowing something out of the box.
An entity has to recognize the deffered tax at every cost (since it is required by an IFRS) if the IFRS's (IAS-12) requirments for recognizing such ASSET and INCOME are technically met. There is nothing like ADVISING aclient for reduction of losses on this issue. If deferred tax asset arises and requirements are met it HAS TO BE recognized. If entity does not recognize it, auditor has to qualify his report; and where it cannot be recognized and the entity recognizes it, again audit report has to be qualified. (Materiality may count in taking decision).
Mind it, deferred tax income is not an operational item and it will never in essence will ensure continuety of generation of income flow from operations by any means. If there are no future expectations as to TAXABLE profits and if the deferred tax asset is technically found to be impaired on the grounds provided by IAS-12, deferred tax asset cannot be recognized or will be sliced down to the acceptable limit.
I may be ignoring something but so far I am wondering what an "ADVICE" has to do with deferred tax issue. You have to follow IFRS and if you are not doing it, auditor has to modify his opinion. Simple. Even if recognition of deferred tax asset will reduce accumulated loss yet it has nothing to do with ADVICE. It looks weird.
This is just like saying that if an entity is earning good profits and wishes to reduce reported profitability you should ADVISE them to charge depreciation. What the hell depreciation has to do with advice?
Anyway there may be a case of misunderstanding the question at all and that buddy might have asked altogether a different thing.
As far as reduction of losses is concerned, there could be 101 advices but before that the due insight of the entity and reason of its losses is inevitable.
Regards,
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Isn't the job of the auditor to make sure that the financial statements are reasonably free from material misstatement whether due to fraud or error?If the business is incurring losses due to some weaknesses in internal control,the auditor points those out routinely in the Letter of Weakness.Why would the auditor advise the business of ways of minimizing general losses in the first place?It's not part of the audit engagement.I am confused.Please clarify.